Lower iron ore, copper prices weigh on BHP Group (ASX: BHP) 1HFY23 profit; outlook remains positive - Kalkine Media

February 21, 2023 03:26 PM AEDT | By Versha Jain
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Highlights:

  • BHP Group Limited (ASX: BHP) on Tuesday, 21 February 2023, reported a 32% decline in net profit after tax for H1FY23.
  • The board declared an interim dividend of 90 US cents per share scheduled for payment on 30 March.
  • The company expects volatility in the short term but anticipates commodity demand from China to provide some stability. It remains optimistic for the long-term demand for steel, non-ferrous metals etc. 

BHP Group Limited (ASX: BHP) on Tuesday, 21 February 2023, reported a 32% decline in its net profit after tax (NPAT) attributable to members of the company in the half-yearly results it announced today.

The shares of BHP were down over 2% earlier in the day, but partially recovered towards the day's end and changed hands at AU$48.43 at around 03:27 pm AEDT on 21 February.

Company Name Market Price
(AU$)
Market Cap
(AU$)
Yearly Return
(%)
Dividend Yield
(%)
PE Ratio
(x)
YTD
(%)
52W High
(%)
52W Low
(%)
BHP GROUP FPO [BHP] 48.43 245.269B 1.04 9.63 8.42 6.20 53.72 35.83

*Data powered by Morningstar®. Data delayed 20 minutes unless otherwise indicated. Read More
as of 21/02/2023, 03:27:11 PM AEDT

Its revenue fell 24% to US$25,713 million compared to the corresponding half year ended 31 December 2021, and underlying EBITDA was noted at US$13.2 billion, down 28% annually. EBITDA margin of the Anglo-Australian mining giant dropped to 54% from 64% in the corresponding period of last year.

The mineral explorer and producer’s NPAT declined 32% to US$6,457 million in H1FY23 ended 31 December 2022, from US$9,443 million in H1FY22. While lower iron ore and copper prices during the period impacted the revenue of BHP Group, wet weather impacted unit cost of production of the mining giant as it faced challenges in securing labour, the company said.

The company produced record iron ore in Western Australia during the half year. Also, it experienced positive exploration results from Oak Dam, suggesting potential for copper business. Focused on developing growth options, BHP entered into an agreement to acquire 100% shares of the OZ Minerals and initiated divestment of Daunia and Blackwater mines with its JV partner, Mitsubishi Development Pty Ltd, during the first half.

BHP announced in December 2022 to acquire OZ Minerals Ltd (OZL) through a scheme arrangement. The offer price was AU$28.25 per OZL share in cash. 

Its capital and exploration expenditure for the half-year FY23 was US$3.0 billion, the net operating cash flow was US$6,770 million, and the free cash flow was US$3,481 million. 

As of 31 December 2022, its net debts increased to US$6.9 billion but remained near the lower-end of the company’s target range of US$5 to US$15 billion. The increase in net debt YoY was mainly due to the final dividend paid in September 2022 to shareholders. Its net debt was US$6,090 million in H1FY22.

BHP FY23 interim dividend

BHP board declared an interim dividend of 90 US cents per share (cps) for H1FY23, which was 60 US cps lower than 150 US cps announced in H1FY22. The interim dividend is scheduled for payment on 30 March 2023 to the shareholders of record on 10 March 2023. The payout ratio was 69% for the first half of FY23.

BHP Outlook for 2HFY23

The company expects higher demand for steel, fertilisers, and non-ferrous metals to continue in the longer term primarily due to the growing population, rising standard of living and infrastructure needed for decarbonisation. In the short term, it expects volatility and slower growth impacted by ‘anti-inflationary’ policies. But, simultaneously, it expects the commodity demand from China to provide some stability.

Despite inflation control measures, it expects the marginal cost of mining production to stay higher than in the pre-COVID-19 period. According to the company, this would mean a higher margin for those who can operate at a low cost. 

BHP management comment

On 31 December 2022, the company had cash and cash equivalents of US$9,605 million. 


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